A budget of two halves for council staff

More than half the employees at Reading Borough Council will have their pay frozen for two years – but the rest will get a pay rise.

Chancellor George Osborne announced a public sector pay freeze in his budget yesterday but those earning less than £21,000 will get a flat rise of £250 each for two years.

At Reading Borough Council that means 1,233 staff will benefit while 1,896 will be left out in the cold.

Debbie McKenzie, branch secretary of Unison, said: “The public sector pay freeze is very bad news for union members and non-union members alike. Public sector workers have had below inflation pay rises for the last three years and a freeze for the next two – especially with inflation running at 3.5 per cent – will mean a loss in earnings in real terms of 5.7 per cent.”

She went on: “Of course the flat rate rise for people earning under £21,000 is welcome news and anything to increase the wages of very low paid workers is a good thing.”

Meanwhile, the leader of Reading Borough Council said the budget was “difficult but but fair”.

Councillor Andrew Cumpsty said it was “good news” that in line with Reading Borough Council’s own plan, the Chancellor was also supporting a zero per cent increase in council tax next year. But Labour leader Cllr Jo Lovelock called it a “cynical budget”.

Chancellor George Osborne announced his “unavoidable budget” calling it “tough but fair” and promising it would “get to grips with welfare”.

Cllr Cumpsty told the Reading Post: “These are very difficult decisions that have had to be taken but they are fair. The measures protect the people who are less well paid. They ensure everyone plays their part in the recovery.”

The main budget points:

- VAT to rise from 17.5 per cent to 20 per cent from January 4. - Personal tax allowance to go up by £1,000 to £7,475 – worth £170 a year to basic taxpayers - Councils which propose a low increase will be helped to freeze council tax for a year - Capital gains tax stays at 18 per cent for low and middle income savers, but rose at midnight yesterday to 28 per cent for high rate taxpayers - Proposed landline tax scrapped - Child benefit frozen for three years - Child tax credit will increase for low income families - The earnings ceiling for tax credits will be reduced from £50,000 a year to £40,000 - The health in pregnancy grant will be abolished next April and the Sure Start maternity grant will apply only to the first child - Lone parents will be expected to look for work when their youngest child starts school - Housing benefit will be capped at a new maximum of £400 a week to save £1.8billion a year - State pensions will rise in line with earnings, prices or 2.5 per cent whichever is greatest each year, but the Government will accelerate the increase in state pension age to 66 - Corporation tax will be cut next year from 28 per cent to 27 per cent and by one per cent each year for three years - Large banks will have to pay a levy of more than £2 billion a year - No change to booze, fuel and cigarette taxes apart from the scrapping of a cider tax increase.

Cllr Cumpsty added: “They are decisions that are right for the country.”

Cllr Lovelock however criticised the increase in VAT saying it would “hit people least able to afford it”.

She added: “The Government is cynically using this opportunity to cut public spending because that is what it wants to do.

“In two or three years’ time, the measures already in place in taking the banks into public ownership will start to pay back dividends by which time the Chancellor will be able to announce a giveaway budget in time for the next election. It is very cynical.”

She also described the cuts already proposed that would hit local authorities and the plan to freeze council tax as a “double whammy” and “very worrying”.

Ian Miles, head of the private client team at Thames Valley-based accountants James Cowper, commented on the effects of the budget on middle-income families saying: “There are no changes in policies that target the super rich and plenty of measures to help those on lower incomes and vulnerable families.

“It is those with middle incomes that will be hit hardest.

“The increase in VAT to 20 per cent from January 4 will hit everyone, but those on middle incomes will lose their tax credits.

“They will not benefit from the changes announced in National Insurance or from the changes to income tax threshold. This middle income group that makes up the large proportion of the UK will be particularly hard hit if they have modest share portfolios and make gains over the annual allowance.”